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Why Are Investors Giving up Shareholder Rights?

Last updated on June 28, 2020

Shareholder Rights?

Shareholders used to be proud to own a company and invest in its growth.

These days, no one gives a fuck.

Did my portfolio go up? Cool, back to Netflix. 

The government and financial services industry have said that the only way to be “prepared for retirement” is to invest aggressively into the stock market.

Huh?

The average American literally knows nothing about the stock market, how to evaluate a share price, what impacts the markets, monetary policy, etc.

Isn’t it weird that our government wants us to invest our life savings into an asset class they know we don’t understand?

Shareholders don’t care about their voting rights because they don’t know they have them. They aren’t investors, they are just drones doing what the government and Wall Street tell them to do.

And that’s not all. Another reason for shareholder rights indifference is the rise in index investing.

Index investors aim to mimic the performance of a certain market. So if you want your portfolio to mirror the the S&P 500, for example, you would buy the VFINX. This fund will take your money and buy every company listed in the S&P 500.

Since index investors are also drones that don’t care which companies they own or support, they don’t care about shareholder rights or influencing corporate decisions.

This is ironic given how many index investors hate “evil capitalism.”

But it’s okay to profit blindly from the fruits of capitalism through your investment portfolio?

Related Reading: What did Occupy Wall Street Accomplish?

So What are Shareholder Rights?

Any investor in a publicly traded company is a shareholder.

Being a shareholder makes you part-owner of the company you bought stock in. The detail that’s been lost in today’s investing-made-easy world is that the ownership entitles you not only to a share of the company’s profits, but also the right to exercise a degree of control over company operations.

For example, shareholders can vote on who to hire as CEO, who to have sit on the board, corporate policies, executive salaries, and many other decisions public companies make everyday.

If people are enraged with “evil capitalism,” then why not participate and vote?

Related Reading: How to Be a Conscious Investor

Some Shareholders Have More Rights Than Others

Not all shareholders are average investors like you and me.

These days, it’s common for corporate executives to own large stock positions in the companies they run. The more stock you own in a company, the more weight your vote carries — so corporate executives sway decisions by voting for what benefits them individually.

Even if that vote was not the best decision for the company as a whole.

We see this in action when it comes to CEO salaries or unqualified friends and family serving on corporate boards.

Now you understand how CEO’s get away with this:

shareholders rights

Related Reading: The Pros and Cons of Index Funds

Founders Can Deny Shareholder Rights

Unsurprisingly, the founders of a company are also large shareholders.

It is less disturbing when a founder has controlling power of a company through his shareholder voting rights than when a CEO or executive team does.

By virtue of being the founder, he or she will have the company’s best interest at heart. This is not the case with CEO’s and executive teams brought in from the outside.

That said, founders are stirring up their own trouble when it comes to shareholder voting rights.

In the rise of technology companies, many founders prefer raising money privately instead of taking their company public.

One reason for this is shareholder voting rights. Founders want to maintain control over their company and raising money from the public requires them to disclose every single detail as well as give up voting power to shareholders like you and me.

This arrangement is called “No-Vote Shareholders” and is making headlines.

Evan Spiegel, the founder of Snapchat, was the first founder to go public as long as shareholders gave up their voting rights.

 

 

 

 

 

 

 

 

Despite the media coverage, people didn’t care.

They don’t care because most investors don’t know what they own, don’t care, don’t exercise their rights, and only check that the value of their portfolio is going up — they are too busy protesting capitalism LOL.

Related Reading: Alternatives to Investing in the Stock Market

The Death of Shareholder Rights

Index funds now control over half of the US stock market. That is insane, especially when you consider that three financial firms own over of 80% of that wealth.

THREE.

The companies are Vanguard, BlackRock and State Street.

Americans used to vote with their dollars, align their portfolios to their values, and weren’t total hypocrites.

These days, in a post-Occupy Wall Street world, we prefer to hand our cash over to supersized financial firms and relinquish our voting rights to the corporate elite. This is precisely why wealth disparity is out of control in this country, good job America.

According to this Reuters article, below are just a few examples of how the financial firms you trust are voting on your behalf:

Should we double the salary of the CEO of PG&E Corp? The guy on the hook for California’s wildfires?

Vanguard, BlackRock and State Street voted yes.

Should we approve massive pay packages for Coty, Inc. executives, even though they made terrible acquisitions that brought down the value of the company?

Vanguard, BlackRock and State Street voted yes. 

Should we include a special $500,000 tuition fund for the Coty executives’ kids, to help pay for their college?

Vanguard, BlackRock and State Street voted yes.

Should we split the CEO and chairman roles at General Electric, since the company is a shit-show and the CEO is driving it into the ground?

Vanguard, BlackRock and State Street sees no problem with the CEO and voted no.

Liberals bitch and moan about the evils of capitalism, but then refuse to learn how it works.

There is no reason Vanguard should vote on anyone’s behalf. And if you’re an index investor who also cares about climate change, then you need to own the fact you profit personally from ExxonMobil.

Educate yourself and participate, or stop complaining.

Related Reading: Why Are Liberals So Stupid?

Financial Technology Fails to Inform Users of Shareholder Rights 

Technology can go either way.

When it comes to Google Maps, Twitter, and iPhone’s, we have obviously benefited.

But when it comes to investing, I can’t say that robo-advisors and trading apps such as Robinhood have helped us one bit.

All they have done is made is faster and easier to give them money.

At a time when our country is looking for solutions to even the playing field, robo-advisors and investment apps have missed the opportunity to inform users of the role they play in the markets.

Millions of Americans invest their savings into an asset class they don’t understand and then wonder how this becomes our reality:

Have you used an robo-advisor or trading app?

All you do is create an account and then answer a robot’s questions about your age, income, risk tolerance and POOF! you’re an investor.

Most platforms are funneling investors into the same stocks (Netflix, Google, Facebook, Apple, etc.). In fact, investment flows into broad market index funds have risen from $531 billion in 2008 to $3.4 trillion in 2018.

$3.4 TRILLION in 2018.

When a Ponzi scheme works, it’s brilliant, right?!

Robo-advisors encourage customers to see the stock market as an ATM: Put money in and X years later you’ll have Y! 

News flash: You are responsible for your money. Have some integrity and learn where it’s going.

Related Reading: Is a 401k Worth It?

It’s over: Shareholders Gave Up Voting Rights

So do shareholders still have rights? The answer is no, because they gave them away.

The pride of owning stock in a company whose mission you support has disappeared. The days of boycotting a company and divesting your shares because they mistreated employees are over.

Complacency is now the name of the game.

No one has time for morals when they invest in index funds through their retirement accounts. In fact, the system is designed to have you fork over your money for 30-40 years and never say a fucking word.

And you’re still not suspicious?

How much more clear can they make it that Wall Street is the government’s priority?

Retirement accounts reduce the power of hundreds of millions of people down to just a few CEO’s at a couple wealth management firms. Are you naive enough to think these CEO’s are voting with the public’s interest in mind?

The farther you are away from your investment, the less concern you have for how it works and operates.

And that’s exactly how Wall Street and their government cronies like it.

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